Truly, something very odd is happening to our politics. The Institute of Directors has just come out in favour of Gordon Brown's plans for unfunded tax cuts.

The IoD used to be one of the most Thatcherite business organisations. At one stage, while the CBI was cosying up to New Labour, the IoD was virtually alone in holding out for sharp cuts in government spending.

But today, in a news release, it said that the "once in a generation financial crisis means that aggressive use of fiscal policy is needed to support monetary policy in reducing the severity of the recession".

The IoD calls for a large temporary fiscal stimulus, to be given through tax cuts financed by borrowing, but also emphasises the need for a clear route back to balanced public finances in the medium term.

The IoD believes a fiscal stimulus is necessary because reductions in interest rates will not in themselves turn the economy round. The British and world economies are experiencing a once in a generation financial crisis where monetary policy is potentially pushing on a string. The stimulus should be given through tax cuts and not through increased spending, aside from one-off infrastructure projects which can be brought forward.

Miles Templeman, Director General of the IoD, said:

"Whilst the IoD continues to advocate a significant medium to long-term reduction in the size of the state, we also recognise that extraordinary times call for extraordinary measures. Crucially however, our fiscal stimulus focuses on lower taxes and productive infrastructure investment. Almost the opposite of fiscal policy in recent years."

The IoD wants a tax cut package worth £20bn. Government briefing suggests that Monday's announcement won't be on that scale but, on a day when the Tories are arguing against borrowing being allowed to rise to fund tax cuts, Gordon Brown can add the IoD to the list of organisations on his side, not David Cameron's.

The CBI also backed unfunded tax cuts today. It issued a statement saying that, althought it supported Cameron's call for public spending to be curbed, it thought that "in the current exceptional circumstances … there is a case for a well-targeted, controlled and time-limited fiscal stimulus in the immediate future".